Consolidated Settlement of Accounts for the First 3 Quarters Ended December 31, 2011 [Japanese Standards]

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1 The figures for these Financial Statements are prepared in accordance with the accounting principles based on Japanese law. Accordingly, they do not necessarily match the figures in the Annual Report issued by the Company, which present the same statements in a form that is more familiar to foreign readers through certain reclassifications or summarization of accounts. Consolidated Settlement of Accounts for the First 3 Quarters December 31, 2011 [Japanese Standards] Shiseido Company, Limited Listings: Tokyo Stock Exchange, First Section (Code Number: 4911) URL: Representative: Hisayuki Suekawa, President/CEO & Representative Director Contact: Akihiro Miyasaka, General Manager of Investor Relations Department Tel Filing of quarterly financial report: February 10, 2012 Start of cash dividend payments: Supplementary quarterly materials prepared: Yes (Supplementary information will be uploaded to the Company website on Tuesday, January 31, 2012.) Quarterly results information meeting held: Yes (for institutional investors, analysts, etc.) 1. Performance for the (From April 1 December 31, 2011) * Amounts under one million yen have been rounded down. (1) Consolidated Operating Results (Millions of yen; percentage figures denote year-on-year change) Net Sales Operating Income Ordinary Income Net Income First 3 Quarters December 31, ,704 [+0.8%] 26,748 [+5.5%] 26,975 [+6.0%] 5,774 [ 35.9%] First 3 Quarters December 31, ,973 [+4.8%] 25,360 [ 22.3%] 25,442 [ 24.1%] 9,010 [ 62.0%] Note: Comprehensive income First 3 quarters ended December 31, 2011: 8,400 million [ %] First 3 quarters ended December 31, 2010: 14,611 million [ %] First 3 Quarters December 31, 2011 First 3 Quarters December 31, 2010 Net Income per Share (Yen) Fully Diluted Net Income per Share (Yen)

2 (2) Consolidated Financial Position First 3 Quarters December 31, 2011 Shiseido Co., Ltd. (4911) Financial Results for the Total Assets Net Assets Equity Ratio (%) 690, , Fiscal Year March 31, , , [Reference] Equity: First 3 quarters ended December 31, 2011: 278,598 million Fiscal year ended March 31, 2011: 307,269 million Pursuant to its application of Accounting Standard for Accounting Changes and Error Corrections (ASBJ Statement No. 24, December 4, 2009) and Guidance on Accounting Standard for Accounting Changes and Error Corrections (ASBJ Guidance No. 24, December 4, 2009), the Company has applied retrospective treatment to its consolidated financial statements for the fiscal year ended March 31, For more details, please refer to 2. (3) Changes in accounting policies; changes in accounting estimates; restatements on page 6 of this report. 2. Cash Dividends Cash Dividends per Share (Yen) First Quarter Second Quarter Third Quarter Year-End Full Year Fiscal Year March 31, Fiscal Year Ending March 31, Fiscal Year Ending March 31, 2012 (plan) Note: Revision to dividend forecast during period: None 3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2012 (From April 1, 2011 March 31, 2012) (Millions of yen, percentage figures denote year-on-year change) Net Sales Operating Income Ordinary Income Net Income Net Income per Share (Yen) Fiscal Year Ending 680,000 [+1.4%] 40,000 [ 10.0%] 40,000 [ 10.1%] 17,000 [+32.9%] March 31, 2012 Note: Revision to consolidated earnings forecast during period: Yes 4. Other Information (1) Significant changes in subsidiaries during period (changes in specific subsidiaries due to change in scope of consolidation): None (2) Special accounting treatment adopted: None (3) Changes in accounting policies; changes in accounting estimates; restatements 1) Changes in accounting policies due to amendment of accounting standards: Yes 2) Other changes in accounting policies: Yes 3) Changes in accounting estimates: None 4) Restatements: None 2

3 (4) Stocks outstanding (common stock) at term-end 1. Number of shares outstanding (including treasury stock) First 3 quarters ended December 31, 2011: 400,000,000 Fiscal year ended March 31, 2011: 400,000, Number of treasury stock outstanding First 3 quarters ended December 31, 2011:2,018,176 Fiscal year ended March 31, 2011: 2,052, Average shares outstanding over period (cumulative; consolidated) First 3 quarters ended December 31, 2011: 397,968,760 First 3 quarters ended December 31, 2010: 397,841,568 Shiseido Co., Ltd. (4911) Financial Results for the Implementation status of quarterly review procedures At the time of disclosure of this report, review procedures for quarterly financial statements pursuant to the Financial Instruments and Exchange Act had not been completed. Appropriate use of business forecasts; other special items In this document, statements other than historical facts are forward-looking statements that reflect the Company s plans and expectations. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results and achievements to differ from those anticipated in these statements. Please refer to 1. (2) Full-Year Performance Outlook on page 6 for information on preconditions underlying the above outlook and other related information. 3

4 Contents 1. Analysis of Operating Results 5 (1) Consolidated Performance 5 (2) Full-Year Performance Outlook 6 2. Summary (Other) Information 6 (1) Significant Changes in Subsidiaries 6 (2) Special Accounting Treatment Adopted 6 (3) Changes in Accounting Policies; Changes in Accounting Estimates; Restatements 6 3. Major Items Related to Ongoing Concern Assumption 7 (Reference) Parent Company and Group Subsidiaries: Review by Geographical Area and Overseas Sales 8 4. Consolidated Quarterly Financial Statements 9 (1) Consolidated Quarterly Balance Sheets 9 (2) Consolidated Quarterly Statements of Income and Consolidated Quarterly Statements of Comprehensive Income 11 (3) Note on Assumptions for Going Concern 12 (4) Note in the Event of Major Changes in Shareholders Equity 12 (5) Supplementary Information 12 4

5 1. Analysis of Operating Results (1) Consolidated Performance In the three-quarter period under review (nine-month period from April 1 to December 31, 2011), the Japanese economy showed signs of a moderate turnaround following a slump in the wake of the Great East Japan Earthquake. However, the outlook became increasingly unclear due to the yen s ongoing sharp appreciation and other factors. Accordingly, consumer sentiment remained weak, resulting in negative growth for the cosmetics market. Overseas, however, there was sustained, albeit gradual, growth in the European and North American cosmetics markets, as well as continued strong market expansion in China and elsewhere in Asia. (For overseas subsidiaries, the first three quarters refers to the period from January 1 to September 30, 2011.) Under these circumstances, the Shiseido Group posted consolidated net sales of billion, up 0.8% compared with the previous corresponding period. The Domestic Cosmetics Business segment posted a 3.3% decline in sales, to billion, due partly to weakness in self-selection cosmetics. This was despite a solid performance by high-priced counseling cosmetics in department stores, as well as a year-on-year increase in sales of toiletries, boosted by the TSUBAKI hair-care brand, which underwent a communication renuewal in December In contrast, sales of the Global Business segment rose 6.3%, to billion. This was due to year-on-year sales growth in all geographical regions. Major factors included sustained, solid results in China and steady growth of the global brand SHISEIDO in Europe and the Americas, as well as favorable performances by fragrances in Europe and the makeup brand NARS in the Americas. Despite making proactive growth-related marketing investments, operating income increased 5.5%, to 26.7 billion. Earnings benefited from the absence of a one-time rise in cost of sales associated with the acquisition of Bare Escentuals in the previous corresponding period. Ordinary income grew 6.0%, to 27.0 billion. Net income fell 35.9%, to 5.8 billion. This was due to a about 3.0 billion increase in deferred income taxes caused by a change in the legal effective taxation rate based on deferred tax assets and deferred tax liabilities, following a revision to the tax system. [Consolidated Performance] (Sales) Domestic Cosmetics Business First 3 Quarters December 2011 Share of Total (%) First 3 Quarters December 2010 Year-on-Year Increase/Decrease Share of Total (%) Amount % change 260, % 269, % 8, % Global Business 223, % 210, % +13, % Others 6, % 7, % % Sales Total 490, % 486, % +3, % Domestic Sales 280, % 287, % 7, % Overseas Sales 210, % 199, % +10, % 5

6 (Income) Domestic Cosmetics Business First 3 Quarters December 2011 Ratio to Net Sales* (%) Shiseido Co., Ltd. (4911) Financial Results for the First 3 Quarters December 2010 Ratio to Year-on-Year Increase/Decrease Net Sales* (%) Amount % change 24, % 25, % % Global Business 1, % (1,295) 0.6% +2,557 Others 1, % 1, % % Elimination Operating Income Total 26, % 25, % +1, % Ordinary Income 26, % 25, % +1, % Net Income 5, % 9, % 3, % *Based on sales, including intra-group sales between reportable segments. (2) Full-Year Performance Outlook In light of several factors, such as a revision to the tax code in the three-quarter period under review, the Company has decided to change its full-year forecast for net income only (previous forecast announced on October 31, 2011). Accordingly, the latest consolidated full-year forecasts are as follows: net sales of billion (up 1.4% year-on-year), operating income of 40.0 billion (down 10.0%), ordinary income of 40.0 billion (down 10.1%), and net income of 17.0 billion (up 32.9%; previous forecast was 21.0 billion). These forecasts are based on assumed exchange rates of 80.0 per U.S. dollar, per euro, and 12.5 per Chinese yuan. 2. Summary (Other) Information (1) Significant Changes in Subsidiaries Not applicable. (2) Special Accounting Treatment Adopted Not applicable. (3) Changes in Accounting Policies; Changes in Accounting Estimates; Restatements (Change in accounting treatment for product samples and promotional materials) Previously, the Company s subsidiaries in Americas treated product samples and promotional materials used in retail store sales activities as assets at the time of acquisition and expenses at the time of shipment to customers, i.e, retail stores. Effective the first quarter of the current fiscal year, however, such items are now treated as expenses at the time of acquisition, in the interests of consistency in internal Group accounting treatment. The change in policy has not been applied retrospectively to the Consolidated Statements of Income or Consolidated Statements of Comprehensive Income for the first three quarters of previous fiscal year, because balance of inventories have remained mostly unchanged and the differences in term-end balances are not deemed significant. Reflecting the cumulative impact on net assets at the beginning of the previous fiscal year, retained earnings for that year declined 1,064 million as a result of the change in accounting policy. 6

7 (Change in method of calculating fully diluted net income per share) Effective the first quarter of the current fiscal year, the Company has applied Accounting Standards for Earnings Per Share (ASBJ Statement No. 2, June 30, 2010) and Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No. 4, June 30, 2010). In calculating diluted earnings per share, for stock options in which the right to exercise options is vested after a specified service period, the fair value of service expected to be provided to the Group in the future is added to the proceeds assumed to be received when options are exercised. In the first quarter of the previous fiscal year and the first quarter of the current fiscal year, the Company reported net losses. For each of those periods, therefore, the new accounting standards had no effect on fully diluted net income per share, so it was not mentioned in the Consolidated Settlement of Accounts for the First Quarter June 30, In the first three quarters of the previous fiscal year, adoption of the aforementioned accounting standards would have had a minimal effect on fully diluted net income per share, so it has not been applied retrospectively. 3. Major Items Related to Ongoing Concern Assumption Not applicable. 7

8 (Reference) Parent Company and Group Subsidiaries: Review by Geographical Area and Overseas Sales Parent Company and Group Subsidiaries: [Sales by Geographic Area] 1st 3 Quarters December 2011 Share of Total (%) Shiseido Co., Ltd. (4911) Financial Results for the 1st 3 Quarters December 2010 Share of Total (%) Year-on-Year Increase/Decrease Amount % change Japan 281, % 287, % 6, % Americas Europe Asia/Oceania 63,737 64,619 81, % 13.2% 16.5% 61,690 60,871 76, % 12.5% 15.7% +2,046 +3,747 +4, % +6.2% +6.0% Outside Japan 209, % 199, % +10, % Net Sales 490, % 486, % +3, % Parent Company and Group Subsidiaries: [Operating Income by Geographic Area] 1st 3 Quarters December 2011 Ratio to Regional Sales 1st 3 Quarters December 2010 Ratio to Regional Year-on-Year Increase/Decrease Sales Amount % change Japan 12, % 12, % % Americas Europe Asia/Oceania 4,653 4,372 4, % 6.5% 5.6% (1,215) 5,363 6, % 8.4% 9.0% +5, , % 33.4% Outside Japan 13, % 11, % +2, % Elimination 985 2,045 1,059 Operating Income 26, % 25, % +1, % [Overseas Sales (by Destination)] Americas Europe Asia/Oceania 1st 3 Quarters December ,374 59,165 85,095 Share of Net Sales 13.5% 12.1% 17.3% 1st 3 Quarters December ,603 55,718 80,534 Year-on-Year Increase/Decrease Share of % change Net Sales in local Amount % change currency terms 13.1% 11.4% 16.5% +2,771 +3,447 +4, % +6.2% +5.7% +15.2% +10.9% +11.2% Overseas Sales 210, % 199, % +10, % +12.4% 8

9 4. Consolidated Quarterly Financial Statements (1) Consolidated Quarterly Balance Sheets Shiseido Co., Ltd. (4911) Financial Results for the Fiscal Year March 2011 First 3 Quarters December 2011 ASSETS Current Assets: Cash and Time Deposits 90,006 53,751 Notes and Accounts Receivable-Trade 103,002 93,295 Short-Term Investments in Securities 15,051 30,267 Inventories 65,850 75,677 Deferred Tax Assets 27,318 16,575 Other Current Assets 12,924 21,886 Less: Allowance for Doubtful Accounts (938) (896) Total Current Assets 313, ,557 Fixed Assets: Property, Plant and Equipment, at Cost: Buildings and Structures 160, ,537 Less: Accumulated Depreciation (98,605) (98,176) Buildings and Structures (net of depreciation) 61,439 59,360 Machinery, Equipment and Vehicles 82,166 80,189 Less: Accumulated Depreciation (71,084) (70,162) Machinery, Equipment and Vehicles (net of depreciation) 11,082 10,026 Fixtures and Fittings 54,677 54,532 Less: Accumulated Depreciation (36,825) (36,866) Fixtures and Fittings (net of depreciation) 17,852 17,666 Land 33,490 33,539 Lease Assets 9,817 9,424 Less: Accumulated Depreciation (5,285) (5,375) Lease Assets (net) 4,532 4,049 Construction in Progress 2,823 3,425 Total Property, Plant and Equipment 131, ,068 Intangible Assets: Goodwill 94,122 84,643 Lease Assets Trademarks 42,628 40,163 Other Intangible Assets 48,955 45,777 Total Intangible Assets 186, ,233 Investments and Other Assets: Investments in Securities 27,515 25,845 Prepaid Pension Expenses 24,560 21,970 Long-Term Prepaid Expenses 9,743 9,054 Deferred Tax Assets 19,577 18,074 Other Investments 27,366 25,772 Less: Allowance for Doubtful Accounts (133) (133) Total Investments and Other Assets 108, ,583 Total Fixed Assets 425, ,885 Total Assets 739, ,442 9

10 Fiscal Year March 2011 First 3 Quarters December 2011 LIABILITIES Current Liabilities: Notes and Accounts Payable 43,771 43,995 Short-Term Debt 5,595 10,606 Current Portion of Long-Term Debt 8,509 5,752 Lease Obligations 2,256 1,982 Accounts Payable Other 37,980 35,665 Accrued Income Taxes 12,214 8,011 Reserve for Sales Returns 11,447 9,571 Accrued Bonuses for Employees 11,549 6,507 Accrued Bonuses for Directors Provision for Liabilities and Charges Reserve for Disaster 922 Deferred Tax Liabilities Other Current Liabilities 24,263 24,012 Total Current Liabilities 159, ,982 Long-Term Liabilities: Bonds 90,000 90,000 Long-Term Debt 88,337 82,726 Lease Obligations 2,818 2,829 Accrued Retirement Benefits 41,285 42,065 Allowance for Losses on Guarantees Allowance for Environmental Measures Deferred Tax Liabilities 29,165 27,521 Other Long-Term Liabilities 6,864 5,912 Total Long-Term Liabilities 259, ,894 Total Liabilities 418, ,876 NET ASSETS Shareholders Equity: Common Stock 64,506 64,506 Capital Surplus 70,258 70,261 Retained Earnings 231, ,177 Less: Treasury Stock, at Cost (3,874) (3,808) Total Shareholders Equity 362, ,136 Accumulated Other Comprehensive Income: Valuation Difference on Available-for-Sale Securities 83 (883) Foreign Currency Translation Adjustments (55,040) (68,654) Total Accumulated Other Comprehensive Income (54,956) (69,538) Stock Acquisition Rights Minority Interests in Consolidated Subsidiaries 12,267 12,315 Total Net Assets 320, ,565 Total Liabilities and Net Assets 739, ,442 10

11 (2) Consolidated Quarterly Statements of Income and Consolidated Quarterly Statements of Comprehensive Income Consolidated Quarterly Statements of Income Cumulative for First 3 Quarters First 3 Quarters First 3 Quarters December 2010 December 2011 Net Sales 486, ,704 Cost of Sales 124, ,818 Gross Profit 362, ,885 Selling, General and Administrative Expenses 337, ,137 Operating Income 25,360 26,748 Other Income Interest Income Dividend Income Equity in Earnings of Affiliates 45 Rental Income Subsidy Income Others Total Other Income 3,343 3,275 Other Expenses Interest Expense 1,617 1,394 Equity in Losses of Affiliates 69 Foreign Exchange Loss Others 1, Total Other Expenses 3,261 3,048 Ordinary Income 25,442 26,975 Extraordinary Income Gain on Sales of Property, Plant and Equipment Gain on Sales of Investments in Securities 2 2 Total Extraordinary Income Extraordinary Losses Impairment loss 101 Loss on Disposal of Property, Plant and Equipment 1, Loss on Sales of Investments in Securities Loss on Valuation of Investments in Securities Loss on Adjustment for Changes of Accounting Standard for Asset Retirement Obligations 831 Purchasing-Related Expenses 1,256 Total Extraordinary Losses 3,695 1,201 Income before Income Taxes 22,300 26,675 Income Taxes Current 9,059 7,708 Income Tax Deferred 2,691 12,004 Total Income Taxes 11,750 19,713 Income before Minority Interests 10,550 6,962 Minority Interests in Income 1,539 1,187 Net Income 9,010 5,774 11

12 Consolidated Statements of Comprehensive Income Cumulative for First 3 Quarters First 3 Quarters First 3 Quarters December 2010 December 2011 Income before Minority Interests 10,550 6,962 Other Comprehensive Income Valuation Difference on Available-for-Sale Securities (1,129) (988) Foreign Currency Translation Adjustments (23,989) (14,364) Share of Other Comprehensive Income of Associates Accounted for Using Equity Method (43) (10) Total Other Comprehensive Income (25,162) (15,362) Comprehensive Income (14,611) (8,400) (Breakdown) Comprehensive Income Attributable to Owners of the Parent (15,176) (8,806) Comprehensive Income Attributable to Minority Interests (3) Note on Assumptions for Going Concern Not applicable (4) Note in the Event of Major Changes in Shareholders Equity Not applicable. (5) Supplementary Information Effective the first quarter of the current fiscal year, the Company made accounting changes and/or corrections of past errors. For this reason, it has applied Accounting Standard for Accounting Changes and Error Corrections (ASBJ Statement No. 24, December 4, 2009) and Guidance on Accounting Standard for Accounting Changes and Error Corrections (ASBJ Guidance No. 24, December 4, 2009). 12